Rational Choice or No Choice at All?
Chapter 2: Tools of the Trade: Rational Choice
2. Tools of the trade: Rational choice I’ld be a dog, a monkey or a bear, or anything but the vain animal, who is so proud of being rational. John Wilmot, Earl of Rochester, A Satire Against Mankind INTRODUCTION Since this is an economic analysis of sin, this chapter begins with a review of the relevant tools of the economist’s trade primarily with reference to demand/consumer choice. Having done so, we then scrutinize the assumptions of rational choice commonly said to underpin the use of these tools. This leads on to a consideration of attempts to push back the boundaries of economic models of decision-making by increasing the complexity of the representation of the utility function, and/or incorporating newer psychological ideas than those which entered the foundations of neo-classical economics. The final section of this chapter looks at the extension of individual choices into social group processes in the form of CORN models (Collectively Ordained Rational Norms). Having developed these, we propose an extension of the models via ‘voice entrepreneurs’ with a specific illustration of the case of some notable ‘sin entrepreneurs’. MODELS OF SIN BASED ON RATIONAL CHOICE BY ISOLATED INDIVIDUALS The standard introductory economic approach to decision-making supposes a fixed utility function which is maximized subject to constraints of price and income. When factor markets are included, income will not be fixed but will be determined by the amount of factor supplied and its rate of return. Factor rates of return may be influenced by investments made in...
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